Saudi Arabia to begin drilling for shale gas this year

Saudi Arabia, the world's largest exporter of crude oil, will push ahead this year with exploratory drilling of shale and other unconventional gas reserves which could be twice the size of its conventional gas reserves, which total 286 trillion cubic feet, Minister of Oil Ali al-Naimi said.

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By SIMON HALL

HONG KONG -- Saudi Arabia signaled Monday that it intends to
remain a world energy powerhouse for the foreseeable future,
partly by exploiting new technology which has unlocked vast
quantities of oil and natural gas in North America.

Saudi Arabia, the world's largest exporter of crude oil,
will push ahead this year with exploratory drilling of shale
and other unconventional gas reserves which could be twice the
size of its conventional gas reserves, which total 286 trillion
cubic feet, Minister of Oil Ali al-Naimi said.

Exploiting unconventional and renewable energy will allow
Saudi Arabia to meet rising domestic demand while maintaining
crude-oil exports, Mr. al-Naimi said, adding that his country
"will not stint" in ensuring that its customers' oil needs are
met.

"This year alone we are
going to test seven wells for shale. We have rough estimates of
600 trillion cubic feet of unconventional shale gas. The
potential is very huge and we plan to exploit it," he said
during a Credit Suisse conference.

Mr. al-Naimi didn't offer a forecast of how quickly Saudi
Arabia might achieve commercial production of shale gas or
shale oil, or describe how it will supply the large amounts of
water used in hydraulic fracturing, or "fracking," the process
used to extract oil and gas from shale.

In separate comments to The Wall Street Journal,
Mr. al-Naimi said he anticipated that the country's shale-oil
reserves could also be exploited, but added that "we have to
find them."

Saudi Arabia has seen its lead over the US in crude-oil
production narrow sharply in the past year, thanks to rising
shale-oil output in the US, where crude production in November
and December topped 7 million bpd for the first time in 20
years. Saudi output eased to 9.2 million bpd in December,
from 9.6 million the previous month.

The US Energy Information Administration recently forecast
that US crude output will swell to 7.5 million bpd within six
months. The International Energy Agency, which represents key
oil consumers, has predicted the US will overtake Saudi Arabia
as the world's largest oil producer by 2020.

Saudi Arabia is known more for its massive crude-oil exports
than its modest gas output, and so far it hasn't managed to
increase gas production enough to replace oil as feedstock in planned petrochemical or
electricity-generating projects.

Aramco CEO Khalid al-Falih said in December that the company
plans to drill seven natural gas exploration wells in deep and
shallow water in the Red Sea, off the coast of the northwestern
city of Tabuk.

On Monday, Mr. al-Naimi said that prospects for global
production of shale gas and oil--including in China, Ukraine,
Poland and Saudi Arabia--were so promising that the kingdom
might not need to continue with its decades-long policy of maintaining an oil-output
cushion for use in case of global supply disruptions.

"It is not a question whether Saudi Arabia has spare [oil]
capacity. It is a question of whether we need to spend billions
maintaining it at all," Mr. al-Naimi said.

"New commercial reserves such as shale oil are good news for
the global economy" and "will ensure even greater stability of
markets and prices," he said.

Mr. al-Naimi said that the hopes of "two or three" members
of the Organization of Petroleum Exporting Countries that the
pricing of crude oil in international trade will shift to a
basket of currencies or the euro would not be realized.

"I don't think that is going to fly," he said.

Dow Jones Newswires

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